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Some critical issues in employment dispute resolution
Dispute over salaries and bonuses
Termination of employment by the employee
Termination of employment by the employer
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1.1. Compulsory pre-litigation mediation and short statute of limitations
a. Compulsory pre-litigation mediation
Almost all claims between an employee and an employer must go through pre-litigation mediation (at the local labor authority), except for disputes relating to:
Dismissal or unilateral termination of employment
Compensation and allowances for termination of employment
Compulsory social insurance and heath insurance
Compensation between the employees and the companies sending labor abroad
Should consider asking the Court to dismiss the claims of the opposing party if such claims have not gone through pre-litigation mediation and do not fall within the above exceptions
Domestic workers (maids, helpers)
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If you are summoned by the local labor authority for a mediation meeting
SHOULD NOT make any statement or submit any document/evidence unnecessarily, the mediator does not have power to force you to do anything or make any conclusion about the case. However, anything you mention or submit during the process could later be used against you at the Court.
SHOULD make as much claims against the opposing party as possible (regardless of whether you have strong evidence or not); otherwise, your counterclaims filed at the Court in the later proceedings may be treated as “have not gone through compulsory pre-litigation mediation” and as a result, may be dismissed by the Court.
1.1. Compulsory pre-litigation mediation and short statute of limitations
a. Compulsory pre-litigation mediation
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Check whether the statute of limitations has expired; if it has, request the Court to dismiss the claims.
Not make any official settlement offer or any other ways of admission of liability, because any partial admission of liability could make the statute of limitations for the whole case being re-started, i.e. the 01-year period will be re-counted from your admission. Without prejudice rule does not exist under the Vietnam law.
If you plan to file any counterclaim against the opposing party, should ensure that you file within the 01-year statute of limitations.
1.1. Compulsory pre-litigation mediation and short statute of limitations
b. Short statute of limitations
Statute of limitations for labor disputes is 01 year from the time of discovering the alleged violations, which is very short. Therefore, as a defendant in a labor dispute, you should:
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These two cases are very disadvantageous for the employer because the employer must prove that every single step in the termination or discipline process strictly complies with the law.
Without advice and review by an experienced litigator during the termination or discipline process, the employer often loses in these types of dispute.
1.2. Burden of proof and provision of documents
In case of termination of employment (by the employer) and labor discipline, the burden of proof falls on the employer.
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Should challenge the evidence of the employee and should not make any unnecessary admission of facts.
What if the Court orders the Company to disclose the internal policies (as per
requested by the employee)?
No effective remedy to impose when the Company refuses to provide the information/documents.
If the Company claims that they do not have or have lost the documents, there is no method for the Court to check such claim.
1.2. Burden of proof and provision of documents
In other cases, the burden proof will fall on the employee as the plaintiff.
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Filing a criminal denunciation against the employee.
Filing a complaint against the newspapers to the supervising
government agencies (e.g. Ministry of Information and Communications).
Filing a lawsuit against both the employee and the
newspapers at the Court.
When seeing the Company taking strong actions, the third parties will question the accuracy of the news articles; the employee and the newspapers will also be afraid and stop their wrongful actions.
1.3. The employee uses newspapers to commit libel during the dispute
During the dispute, the employee may use the newspapers to publish untruth and groundless accusation against the Company with the intention of pressuring the Company into settlement.
In this situation the Company should consider:
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Company A Employee B
All salaries and bonuses are paid in net.
In 2017, instead of paying bonus by cash, Company A paid by
shares with equivalent value.
Under the tax law, for bonuses paid by shares, the PIT is not declared and paid at the time of receiving the shares; but instead, at the time of selling the shares in the future.
Argue that: Must pay additional shares to cover the future PIT, because net
payment means the Company pays PIT.
Argue that: No need to pay additional
shares, the Company only covers tax
withholds at the time of payment.
Should have clear definition and limitation of the Company’s obligations in case of using net payments.
2.1. Net payments
Although net payments (salaries, bonuses, allowances) are often used, there is no definition of net payments under the Vietnam law. This lack of regulations may lead to disputes in the future. For example:
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Defense 1: The Company did not give salary increments and bonuses because the employee failed to meet the performance standards.
While defending against claims of salary increments and bonuses, should not make any indirect admission of liability or make the burden of proof fall on you. For example:
The Court will ask the company: Which standards the employee failed to meet? Ordering the Company to disclose the performance evaluation documents to prove the defense.
Defense 2: The Company does not make any promise for salary increments or bonuses.
The Court will ask the employee: Which evidence shows that the Company promise to provide salary increments or bonuses?
2.2. Salary increments and bonuses
Salary increments and bonuses are not compulsory, unless the Company makes specific commitments.
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If the labor contract is indefinite-term and the employee unilaterally resigns by sending a 45-day notice (as allowed by the law), will the employee need to reimburse the training expenses?
If during the promised working period, the Company dismisses/terminates the employment with the employee, will the employee need to reimburse the training expenses?
Should have a detailed training agreement to address these issues.
3.1. Training expenses
The law provides that the Company can claim back the training expenses, in case the employee terminates the employment illegally and fails to complete the promised working period after the training course.
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One of the issues most concerned by the Company is that their employees may disclose confidential information for competitors after resigning. Thus, many companies use non-disclosure agreement and non-competition agreement to minimize this risk.
a. Are those agreements enforceable in Vietnam?
b. What are the available remedies in case of breach?
3.2. Non-disclosure agreement and non-competition agreement
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a. Enforceability of the agreements
3.2. Non-disclosure agreement and non-competition agreement
Non-disclosure agreement: It is recognized and allowed by the law.
Non-competition agreement: There is no clear regulation relating to non-competition agreement so its validity and enforceability are arguable.
Violation of the right to work under the
Labor Code.
The employee is a weaker party and
must be protected.
This is a civil agreement separate
from the labor contract.
The Civil Code recognizes the right to freely enter into
agreements.
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a. Enforceability of the agreements
3.2. Non-disclosure agreement and non-competition agreement
How to maximize the chance of enforceability of the non-competition agreement?
Separating the non-competition agreement from the labor contract (because the Labor Code strictly protects the employee and is very disadvantageous for the Company in this case)
Ensuring that the agreement is reasonable:
Reasonable limits of the non-competition (applicable time period, geographical area)
What the employee will receive in return?
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a. Enforceability of the agreements
3.2. Non-disclosure agreement and non-competition agreement
Should the non-disclosure agreement and non-competition agreement have arbitration clause, becausethe arbitrators may be more open-minded to accept theseagreements?
ARBITRATORS
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b. Available remedies
3.2. Non-disclosure agreement and non-competition agreement
Claiming damages: Vietnam only recognizes compensatory damages (damages based on actual losses) so this remedy is not reliable in most cases because the actual losses are difficult to prove.
Claiming penalty: Can be applied but must be stipulated clearly in the agreement.
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b. Available remedies
3.2. Non-disclosure agreement and non-competition agreement
Can the Company ask for injunctions such as stopping the employee from using the information or from working for the competitors?
Vietnamese judges often prefer safe, clear and common injunctions such as interim asset freezing. An injunction having a large scope is unlikely to be granted by the judge.
Even if the judge agrees, can the enforcement agency enforce such injunctions in practice?
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Employer’s unilateral termination of employment is very difficult in Vietnam because:
The law only provides some limited grounds for termination, which either requires serious violations of the employee or the circumstances where the employer cannot continue the employment.
Can the parties add more grounds for termination under the labor
contract, e.g. stipulating that the Company can terminate the
employment if the employee fails to meet a specific sale target?
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The burden of proof falls on the Company in this case. For example:
Employee A stole assets of the
Company.
The manager caught this employee and make a record of the violation, but A refused to sign
such record.
Based on such record, the Company dismissed
Employee A.
The Court declared that the termination is
invalid because the record is neither signed by A, nor independent
witnesses.
Should have very strong evidence before terminating the employment with an employee.
Employer’s unilateral termination of employment is very difficult in Vietnam because:
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Alternative options to minimize this risk:
Any small miss/mistake in the termination of employment could result in heavy compensation (may reaches 12 months’ salary or even more).
Mutual termination: In some cases, instead of spending significant time and costs to fulfil the procedures for unilateral termination, it may be more efficient to pay the employee an extra supportive amount and enter into a mutual agreement.
Termination upon the expiry of the probation/employment.
If the probation/employment has expired but the Company needs the
employee to hand over the work; can the parties enter into an agreement to
extend for an additional few days?
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